Canada moves to phase out old rail cars; won't wait for U.S

OTTAWA (Reuters) - Canada will require that the use of older rail cars for carrying crude oil be phased out within three years, even though the United States has yet to make such a rule change, according to documents seen by Reuters on Wednesday.

First responders fight burning trains after a train derailment and explosion in Lac-Megantic, Quebec early July 6, 2013 in this file picture provided by the Transportation Safety Board of Canada. REUTERS/Transportation Safety Board of Canada/Files

The unilateral move is a response to recommendations that followed an investigation into a fiery rail-car derailment in Lac-Megantic, Quebec, last July that killed 47 people.

The faster phase-out of older cars in Canada raises the possibility that these cars will be diverted for use exclusively in the United States if Washington does not move with similar speed.

Norfolk Southern Corp Chief Executive Charles Moorman said on Wednesday that if U.S. regulators also order a fast phase-out, it could have a “limiting impact” on the shipment of crude by rail and “would probably present some problems for us”.

The change will be among a series of measures the Canadian government will announce later on Wednesday to improve the safety of transporting crude oil by rail, an increasingly common practice in North America, where a shortage of pipeline capacity has forced shippers to find alternatives.

Within 30 days, the government will also prohibit use of the most dangerous of the older tank cars for carrying crude oil or ethanol. The cars are considered dangerous because they lack continuous reinforcement of their bottom shells.

Transport Minister Lisa Raitt suggested earlier this year that Canada would act in concert with the United States to improve rail safety, but appeared now to have decided that a rapid phase-out cannot wait.

“As North America’s integrated market necessitates close cooperation, it is important that in the longer term, Canada harmonizes with the U.S. to the greatest extent possible,” Canada’s Transport Department said on Wednesday in a document seen by Reuters.

“However, in this area, Canada will move more aggressively to address the safety concerns of Canadians,” it said, adding that its objective would be to meet or exceed any new standards the United States might develop.

The document is the government’s response to recommendations from its Transportation Safety Board stemming from the Lac-Megantic disaster.

The type of cars that derailed and exploded in the center of the small Quebec town last July are known as DOT-111 cars, and are seen as being vulnerable to puncturing and leakage.

Some 228,000 of the older tank cars remain in service in North America, with 92,000 of them being used in flammable liquid service, a Canadian government-backed review found in February.

The U.S. Railway Supply Institute estimates that 33,800 new tank cars can be built every year.

Since October 2011, new oil tank cars have been built to a higher standard known as CPC 1232. The Canadian directive said the CPC 1232 standard would be the minimum requirement three years from now.

The United States is focusing on a whole new standard that goes beyond CPC 1232, but the process is time-consuming. Canadian Pacific Railway Ltd President Keith Creel estimated on April 3 that it would take 12 to 18 months to come out with new standards.

While Raitt has stressed the integration of the North American market, on April 4 she had said Ottawa could move faster than Washington because Ottawa is not tied down to a prescribed method of rule-making.

Canada’s railway companies, which do not own most of the rail cars they haul, have urged a relatively speedy phase-out of the dangerous cars because they are now compelled by regulation to pull older cars and can end up being liable in the case of accidents.

The Canadian government also said it would issue an emergency directive that would include speed restrictions and higher inspection requirements for the rail carriage of dangerous goods. And it will require emergency response plans for trains carrying oil and ethanol.

The rapid expansion of oil-by-rail and a recent spate of accidents have pushed the issue of rail safety to the forefront.

Additional reporting by Patrick Rucker in Washington, Louise Egan in Ottawa and Kristen Hays in Houston; editing by Peter Galloway